Correlation Between Morningstar Global and Federated Kaufmann

Can any of the company-specific risk be diversified away by investing in both Morningstar Global and Federated Kaufmann at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Morningstar Global and Federated Kaufmann into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morningstar Global Income and Federated Kaufmann Small, you can compare the effects of market volatilities on Morningstar Global and Federated Kaufmann and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Morningstar Global with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Global and Federated Kaufmann.

Diversification Opportunities for Morningstar Global and Federated Kaufmann

0.2

Correlation Coefficient

Morningstar Global  Federated Kaufmann

Modest diversification

The 3 months correlation between Morningstar and Federated is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Global Income and Federated Kaufmann Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Small and Morningstar Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Morningstar Global Income are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Small has no effect on the direction of Morningstar Global i.e., Morningstar Global and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Morningstar Global and Federated Kaufmann

Assuming the 90 days horizon Morningstar Global Income is expected to under-perform the Federated Kaufmann. But the mutual fund apears to be less risky and, when comparing its historical volatility, Morningstar Global Income is 4.6 times less risky than Federated Kaufmann. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Federated Kaufmann Small is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,133  in Federated Kaufmann Small on September 17, 2024 and sell it today you would lose (2.00) from holding Federated Kaufmann Small or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Morningstar Global Income  vs.  Federated Kaufmann Small

Morningstar Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Global Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Morningstar Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Kaufmann Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Kaufmann Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Federated Kaufmann is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morningstar Global and Federated Kaufmann

The main advantage of trading using opposite Morningstar Global and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Global position performs unexpectedly, Federated Kaufmann can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federated Kaufmann will offset losses from the drop in Federated Kaufmann's long position.

The idea behind Morningstar Global Income and Federated Kaufmann Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.